), owned by Longleaf Small-Cap, International, and Global, consists of a legacy construction business and the much larger nitrogen fertilizer business. Natural gas is the primary component in nitrogen fertilizer production, and during the quarter, gas supply interruptions impacted production at OCI’s two Egyptian plants. Although the stock declined, our appraisal held steady, as it already incorporated 50% Egyptian utilization for 2014, and because OCI’s other plants around the world are operating at or near full capacity with low cost gas and higher prices for Ammonia and Urea, two primary outputs. The long-term case for OCI remains compelling as the company is the low cost industry leader in nitrogen fertilizer, essential for world food production. In the next 12–18 months the company will have higher production and lower capex with the opening of a greenfield plant in Iowa and the completion of the Beaumont, Texas extension. The company is also building the largest methanol plant in the country in Texas. CEO Nassef Sawiris has built and monetized substantial value historically; specifically, he has added enormous value for Southeastern’s clients and our partners in the Longleaf Funds through his work at Texas Industries and Lafarge. Most recently, he announced that in early 2015 OCI will separate the fertilizer and construction businesses to remove the conglomerate discount in the stock price.
From Mason Hawkins
)’ Longleaf Partners Third Quarter 2014 Commentary
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